Logistics Lowdown - March 2017

Read this curated collection of articles every month to learn about the latest developments and most pressing problems facing our fast-changing industry.

1. FMC Changes Regulations for Service ContractsThe US Federal Maritime Commission unanimously voted March 6, 2017 to amend rules regarding service contracts and non-vessel operator common carrier (NVOCC) service agreements. These amendments are the first step in modernizing and retooling regulations to be more flexible and keep pace with today’s business needs.

Key changes include:

The filing of sequential service contract amendments with the FMC within 30 days of the effective date of an agreement between shipper and carrier;

An allowance of up to 30 days for filing NVOCC Service Arrangement with the FMC after their effective date;

An extension of the period in which one can file a service contract correction request, from 45 days to 180 days.

2.New Alliances Mean Fewer Ports'THE Alliance' officially starts service April 1, 2017 promising faster transit times, comprehensive port coverage, and 240 modern vessels to meet cargo transport needs. The major ocean liners recently merged and created new networks to cut costs and increase efficiency. The final details show 32 service routes connecting 75 ports across the globe. However, analysts at SeaIntel observe that many port-to-port combinations did not make the final cut. The Asia-Mediterranean and the Trans-Pacific routes combined are losing 250 port-to-port combinations. Port Klang will see a major drop as alliances opt for Singapore or Tanjung Pelepas instead. ‘THE Alliance’ also announced a fund to bolster operations for any liner who becomes insolvent.

3. Air Cargo SoarsAir cargo is off to a good start this year says the International Air Transport Association (IATA). The January 2017 figures show global air freight demand increased by 6.9%, continuing a growth momentum from 2016. This freight growth coincides with the continuing rise of new export orders which are at the their highest since 2011 notes the IATA. On the domestic front, North American air freight grew at a rate of 6.1% compared to January 2016. The international freight volumes for these carriers grew even higher posting an 8.7% increase. Asia-Pacific airlines demand in freight volumes was up 6.0% and capacity increase by 6.6%, compared to the same period in 2016. Alexandre de Juniac, IATA’s Director General and CEO is cautiously optimistic pointing out “the onus is now on the industry to seize the opportunity to accelerate the modernization of processes to make air cargo an even more compelling option for shippers.”

4. Growth of Dedicated Trucking‘Dedicated’ trucking fleets are on the rise according the Wall Street Journal. The practice, where the shipper contracts a carrier to drive only for them, offers predictability for both sides. Shippers lock in rates and the guarantee of the availability of trucks to deliver their goods on time, with the aim of controlling costs and services. Carriers ensure a steady flow of revenue for the company and protection from a volatile market. They forfeit however, the chance to pursue higher rates and profits. On a related note, the Labor Department reports that for-hire trucking added 10,600 jobs in February (largest gain in 5 years), but that gain was preceded by a loss of 5,100 jobs in January.

5. Cargo Insurance Makes More Sense Than EverCargoNet, reports that 836 cargo thefts occurred in North American last year, worth a total of $1.79 million in losses. Food and beverage commodities logged in as the most stolen commodity in 2016. Out of 836 reported cargo thefts, 217 of them involved theft of food and beverage products. Electronics items came in second with 122 reported losses and also had the highest price tag with $45.6 million in reported losses for the U.S. and Canada. Carrier liability for damage or loss is limited to $20 per kilo (for air), $500 per package (for ocean), and $0.50 per pound (for domestic), so to recover full value in the event of a loss getting Cargo Insurance must be considered.